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I cannot say that I am a Trump fan. I am a fan of small government and trillion dollar spending deficits don't feel like small government to me.
However, this is an economic blog, not a political blog and from an economic standpoint, I can't say Trump made the wrong call. He just passed a tariff raising the duty on bearings imported from China by 25%. This means that bearing prices (certainly on this site), will be rising by 25%.
While I am not a fan of high prices, I am also against inefficiency, imbalance and the hollowing out of America's industrial infrastructure.
I have written on this site before of Triffin's Dilemma, which says that if a single country issues the world's reserve currency, that country will eventually go bankrupt. It will go bankrupt, because it will have to print enough currency to grease the wheels of world trade—and in order to do that it will have to run huge trade deficits with the rest of the world.
More than half of the money issued by the U.S. Federal Reserve resides overseas. This is because for years and years, our chief export has been money. The Germans send us cars, we send them money. The Saudis sell us oil, we send them money. Conversely, when Germany wants to buy oil, it must sell cars to get dollars to buy oil. When the Saudis want a German car, they have to sell oil to get dollars to buy a Mercedes.
By sending other countries money instead of goods, the U.S. is exporting inflation. Former French leader Charles DeGalle called this an “exhorbitant privilege”. With nearly all global commodities priced in dollars, America doesn't have to sell anything to get German cars or Saudi oil or Chinese bearings. All we have to do is print up the dollars (which usually involves selling U.S. Treasury bonds to the Germans, Chinese or the Saudis). These dollars that the U.S. prints leave its shores and get held overseas in the “Foreign Reserves” of other countries; which is why all this money printing doesn't cause any inflation inside the U.S.
Unfortunately, this “privilege” has come with a cost, the one spelled out by Triffin: the U.S. Is now bankrupt and owes the rest of the world trillions of dollars it can never repay.
So, while I enjoy being able to buy Chinese bearings at a low price, I also believe it is neither wise nor prudent to owe any nation (because these sales have been financed through the Chinese government by their purchases of U.S. Treasury bills) the staggering sums we now owe China in exchange for those bearings. In case it seems I am picking on China, I don't find it wise or prudent to owe Japan, Germany, Saudi Arabia and much of the rest of the world the staggering sums they are due.
Pain is coming to the American consumer. This inflation that we exported is now finding its way home. It is going to get here one way or another—through tariffs, through dollar devaluation or simply through the rest of the world deciding they don't want any more dollars and demanding tangible goods or assets (like American companies and real estate) in exchange for their products.
Perhaps Trump's trade war is going to allow a more gradual and less painful demise of the current system; perhaps it will be a horrible mess no matter which route is taken. But I cannot blame Trump for this mess and applaud his willingness to tackle the issue--unlike all of his predecessors who kicked the can to where it now stands.
Regardless of who is at fault, buy your bearings now because they will not be getting any cheaper.